The Fine Print
New state employment laws make it more costly for businesses to hire and operate in California — leaving fewer job opportunities for job seekers and the unemployed.Written by Guardian Opinion
08 January 2012
Our California legislators gave the state a hefty present this new year, ringing in nearly 760 new California laws beginning on Jan. 1. This package comes complete with more regulations that harm California businesses. When regulations burden businesses, job opportunities diminish. To a university full of students entering the workforce, these laws should concern UCSD.
At first glance, some of these new 2012 laws might sound appealing, as several of them bring new benefits and protections for employees. New Department of Fair Employment and Housing rules make it easier for employees to initiate discrimination and harassment lawsuits against their employers. This extra protection is in place to help those who may be discriminated in the workplace, such as transgender or homosexual employees. Another law fines employers $5,000 - $25,000 if they “misclassify” an employee as an independent contractor to avoid paying state-mandated benefits. The threat of this fine could compel employers to classify more workers as employees and provide the required additional benefits.
While these rules seem attractive to employees, they add costs and risks for companies. Tightening laws on independent contractors allows businesses to be fined on minor details, while failing to more clearly define the difference between independent contractors and employees. Independent contractor positions are beneficial to businesses because there is no wage withholding, no employment taxes and no liability for fringe benefits. By removing these financial burdens, companies are able to hire more employees, and thus creating a better job market in California. In a shaky economy, working as a contractor is a welcome opportunity for the unemployed — one that may shrink because of this new law.
If businesses can’t find ways to dodge the costs California tries to impose on them, they head for friendlier states, taking potential jobs with them. Carl’s Jr. CEO Andrew Puzder claims California’s current regulations make it too hard to open a new restaurant, so Carl’s Jr. will be opening future restaurants elsewhere. Puzder is not the only one. According to California relocation expert Joe Vranich, the number of companies leaving California has increased from one per week in 2009 to 5.4 per week in 2011. This mass relocation of businesses has sunk California to an employment deficit. Sadly, California’s deterrence to business isn’t letting up. Chief Executive Magazine annually asks 500 CEOs to rank the “best states for business.” California was ranked number 50 in 2011 for the 7th year in a row, with many survey respondents citing the hostile nature of California’s state regulators.
Even companies that remain in California may not be hiring as much. Unemployment in California is currently at 11.6 percent — almost 3 percent higher than the national average. There could be many reasons for this, but the additional regulations in 2012 won’t help the unemployment situation. Citizen Outreach president Chuck Muth puts it nicely: “Government regulations and rules make hiring an employee an expensive royal pain in the keister.” If a local business wants to hire a new employee, it better have the pockets to pay for prevailing wages, overtime rules, workers’ compensations, withholding taxes, payroll reports, family leave rules, discrimination lawsuits, health care mandates, firing regulations…the list goes on and on. Job opportunities are artificially snatched away because employers cannot afford to hire.
These new burdens come during a time when employment after college is more important than ever. A typical student in 2010 owes an average of $25,250 in student loans, according to the Nov. 2 New York Times article “College Graduates’ Debt Burden Grew, Yet Again, in 2010.” Student debt, combined with the highest college graduate unemployment at 9.1 percent for the class of 2010, causes new California laws on employment to be under closer scrutiny.
The message from companies is clear: Excessive regulations make conducting business in the Golden State extremely difficult and costly. As a result, businesses hire less or even ditch California altogether, leaving fewer job opportunities for the unemployed. Companies must be able to hire in California without extra regulations and added costs — the exorbitant amount of California regulations should be reduced. Unfortunately, 2012 merely piles on more. Of course, repealing regulations is not exactly a bed of roses — it means we will have to accept fewer employee protections across the board. Some might say this is “progressing backwards,” but we must remember there are costs to regulations as well; repealing a decent chunk of them might actually be the most crucial step to increasing employment in California.